Report Volume XXIX, Number 15 April 1, 2018

March 27, 2018

INDUSTRY NEWS (Tulsa, OK) – Magellan Midstream Partners, L.P. announced recently that it is considering an expansion of the western leg of its refined products pipeline system in Texas and has launched an open season to assess customer interest. Interested customers must submit binding commitments by 5:00 p.m. Central Time on May 9, 2018.

The proposed expansion would increase Magellan’s capability to transport refined petroleum products, such as gasoline and diesel fuel, from Gulf Coast refineries to demand centers in Abilene, Midland/Odessa and El Paso, Texas, with further optionality to access markets in the states of New Mexico and Arizona, as well as international markets in Mexico via connections to other pipelines owned by Magellan and third parties.

The pipeline’s current capacity of 100,000 barrels per day (bpd) could increase to 140,000 bpd following the expansion.

Subject to the results of this open season and receipt of all necessary permits and approvals, the expanded capacity could be operational by mid-2020.

 

 

INDUSTRY NEWS (Houston, TX) – Magellan will not proceed “at this time” with its plan to build a long-haul crude oil and condensate pipeline in Texas by late 2019 after it failed to garner shipper support to make the project commercially viable, spokesman Bruce Heine said late Wednesday.

“The open season closed on March 1 and we have not received adequate commitments to proceed with the project at this time,” Heine said in an email.

In response to growing production from the Permian and Eagle Ford shale oil plays in southern Texas, Magellan launched on December 1 an open season seeking shipper support for a pipeline that will carry various grades of crude and condensate from both basins to Corpus Christi and the Houston Ship Channel along with US Gulf Coast for domestic refining and exports.

The proposed project would include the construction of a roughly 375-mile, 24-inch diameter pipeline from Crane to a location near Three Rivers, Texas, providing shippers the option to ultimately deliver crude oil and condensate from Three Rivers to the Houston Ship Channel via a new 200-mile pipeline or to the Corpus Christi through a new 70-mile pipeline.

The pipeline system was targeted to have an initial capacity of at least 350,000 b/d, with Magellan keeping an option to increase to 600,000 b/d for each destination depending on market demand, the company said then.

Additional pipeline extensions are also being considered for Midland and Orla, Texas in the Permian Basin and Gardendale and Helena, Texas in the Eagle Ford Basin.

The pipeline was due to start up by end 2019, Magellan said in December.

Heine did not indicate if Magellan has shelved plans to build the pipeline, but said the company is now evaluating joint venture options with stakeholders which will utilize Magellan’s “significant” waterfront assets in Corpus Christi, Texas.

“We continue to believe our terminal in Corpus Christi is a natural landing destination for any pipeline originating in the Permian Basin. We currently own the land to build another 10 million barrels of storage there along with four new docks,” he said.

Magellan already owns and operates a 3.5 million-barrel crude and condensate storage terminal and a 50,000 b/d condensate splitter at Corpus Christi.

The company is also the operator of two legacy crude oil pipelines — the 400,000 b/d BridgeTex and the 275,000 b/d Longhorn — that ship barrels from the Permian Basin to the Houston Ship Channel.

Magellan is targeting to add another 40,000 b/d of new throughput on its BridgeTex line by early 2019, Heine said.

However, the lack of shipper commitment comes at a time when fellow midstream players are forging ahead with new pipelines to accommodate growing Permian and Eagle Ford production that is seeking export outlets to particularly Europe and Asia from Corpus Christi and the Houston Ship Channel.

 

 

INDUSTRY NEWS (Washington, DC) – Three of the five members of the Federal Energy Regulatory Commission (FERC)—which oversees the siting and approval of America’s interstate natural gas pipelines—recently suggested a new policy that will hamper public participation in FERC’s review of applications for new natural gas pipelines, including those that directly affect their land and communities. It could box out people who, through no fault of their own, don’t learn about a proposal to build a new pipeline before the formal deadline for entering the case.

First, some background. When a pipeline developer files an application with FERC to approve a new natural gas project, FERC publishes a Notice of Application. While federal regulations require the applicant to “make a good faith effort” to notify affected people and communities, in reality, Notices of Application aren’t something that you’d fall onto by mistake—you generally need to know where to find it. The Notice outlines a “comment date,” whereby essentially anyone (assuming they meet some basic requirements) can file a request with FERC to intervene and become a “party” in the proceeding. The comment deadline typically is 21 days after publication of the Notice, even for enormous infrastructure projects that affect hundreds or thousands of landowners and others.

The importance of being a party
Being a formal party is important because only parties have the right to later request rehearing of a FERC order approving or rejecting a pipeline proposal – or to appeal that order to the federal courts. Having the right to challenge a FERC order is important because the orders give developers a lot of power—no pun intended. Critically, a FERC order gives pipeline developers a path to take private land via eminent domain.
In other words, if a pipeline developer wants to build a pipeline through your property, being a party in the FERC proceeding is the only way that you’ll be allowed to protest the FERC order. If you’re not a designated party, your voice—legally speaking—doesn’t matter.

However, if someone has “good cause” to miss the deadline, federal rules allow FERC to grant what’s known as an untimely request to intervene. Whether it’s due to not learning about the project until later because it’s not well publicized, or not having the resources to meticulously follow FERC projects, or simple human error, late motions to intervene are common at FERC, even from highly sophisticated parties represented by elite law firms. As such, FERC historically has approved most untimely intervention requests, especially those filed before FERC undertakes its environmental reviews of pipeline projects.

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